A 5-Step Plan for Slaying Your Financial Fears

It’s nearly Halloween, so let’s talk about something really scary: Many of us have the habit of leaving our finances to chance. We hide from financial issues that scare us, but all that does is leave us open to frightening surprises.

As with spooky monsters under our beds, finances do less harm when you shine a light on them. So, follow the advice of financial gurus and face these common financial fears head on.

1. Educate yourself about risks

Yes, there is risk of losing money on stock market investments, but then, if you avoid risk altogether, you also avoid the potential returns of the market that are pretty hard to replicate anywhere else.

Solution: Educate yourself. It is possible to get started with a small amount of money in order to learn your way around the various kinds of investments. Check out this primer on how to invest by Money Talks News founder Stacy Johnson. It explains how to address risks by diversifying, using mutual funds and investing for the long term. As Stacy wrote:

“I’ve been buying both individual stocks and mutual funds for 35 years. I don’t remember the trepidation I must have felt at first. But one thing’s for sure: The more I’ve learned, the fewer mistakes I’ve made and the less fear I’ve felt. Use money you won’t need for a while, get smart and get started.”

2. Ditch your bad debt

Being wary of debt is smart. But being so afraid you freeze isn’t. And it’s important to understand the difference between good debt and bad debt. Good debt is used on a purchase that appreciates in value — such as a mortgage for a home, or even a loan for a college education. Bad debt is incurred when you splurge on luxuries such as clothes, vacations, edibles or even cars. Debt piles up when you are living beyond your means.

Solution: If you’ve been in denial about your mounting debt, it’s time to tackle it. The way to get started, as outlined in this step-by-step approach, is to get all your debts down on a spreadsheet, so you can begin to put a plan in place.

If you need help, you can seek out a professional who specializes in helping debt-laden individuals consolidate such debt as credit card payments and create a workable payment plan.

3. Create a sound budget

Not tracking your expenses is like driving with your eyes closed. Clearly, what you don’t know about your finances can hurt you.

Solution: Set a budget for a day, then a week, and then gradually increase the range. Among our top tips for sticking to a budget is to start with a goal you’re working toward. Doing so will make it easier for you to cut spending. Track your expenses with software, such as that offered by our partner, You Need a Budget.

4. Don’t ignore estate planning

If you put your affairs in good order, you won’t have to fear that your children or other heirs will struggle to figure it out — and curse you — after you’re gone.

Solution: There are eight documents that you should put in place, starting with a last will and testament. That is the only way to ensure you control what your spouse, children and other dependents receive in the event of your death. You can also specify funeral arrangements. You can create your own will, but it’s never a bad idea to enlist an attorney’s help.

5. Prepare now for tax time

Everyone has heard the horror stories of people miscalculating their taxes — or ignoring them — and ending up with a budget-busting bill.

Solution: Lay the groundwork now, so you don’t have to scramble during the last-minute spring rush. If your taxes are relatively simple, now would be a good time to familiarize yourself with online tax software so you can file without paying a tax preparer.

If you want someone else to tackle your taxes, get that help in place now. Ask family and friends for suggestions on qualified CPAs. Then interview two or three. That way you’ll be prepared after you ring in the new year.

What financial fears are lurking in the back of your mind? What can you do to confront them? Share with us in comments below or on our Facebook page.

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